UDAY GARUDACHAR BINDIGANAVALE,BANGALORE vs. ITO,CIRCLE-4(1)(2), BENGALURU

The Assessee is aggrieved with the Appellate Order and is in Appeal before us challenging the levy of the penalty and confirmation of the same by the Ld.

The briefly stated the facts of the case show that the Assessee’s case was selected for scrutiny limited scrutiny for verification of income from house property. The return of income filed by the Assessee on 24.07.2018 was picked up for scrutiny where he has declared the return of income of Rs. 1,34,75,900/-. The Assessee is an individual. He claimed a loss under the head income from house property. Notice u/s. 143(2) of the Act was issued to the Assessee culminated into the assessment order passed on 12.02.2021 u/s. 143(3) r.w.s.143 (3A) and 143 (3B) of the Income Tax Act resulting into the total income assessed at Rs. 1,71,11,474/-.

The brief facts of the addition shows thatAssessee has declared income from salary etc., and also Assessee has shown deemed rent in respect of the property owned by him situated at JP Nagar, 1st Phase, Bangalore comprising of 10,500 sq.ft. with residential building having an area of 3323 sq.ft. ground floor. The Assessee has shown deemed rent of only Rs.2,70,000/- for this property. The deduction was claimed u/s. 24 and net income from house property was shown at loss of Rs. 38,35,575/-. The computation of the total income shows that annual value of Rs. 2,70,000/- was calculated on the basis of value arrived by Bangalore Municipal Corporation per month and multiplied for 10 months. The Ld. Assessing Officer looked at the website of magicbricks.com, 99 acres.com, nobroker.com and found that huge rent is available and being fetched in this case. Therefore he determined the municipal value of the property at Rs. 77,454/- and market value was determined at Rs. 6,00,000/- as annual letting value. Accordingly the total income of the property was considered at net annual value of Rs. 5,84,194/-, standard deduction of 30% was granted therefrom resulting into net annual income of Rs. 40,08,935/-. The Assessee has also incurred interest on borrowed capital for purchase of the house property for which interest is paid of Rs. 40,30,512/- and therefore income from house property shown as net loss of Rs. 36,04,576/-.

The Assessee did not dispute the above Assessment Order and therefore the penalty proceedings were initiated. The Assessee submitted that Assessee was not aware of the introduction of subsection 3A to section 71 of the Act and due to oversight has claimed set off of the entire loss incurred under the house property against other heads. The Ld.Assessing Officer did not accept the explanation of the Assessee for the reason that Assessee has accepted the mistake only after it was pointed out by him, the addition has been accepted, it is the sole responsibility of the Assessee to ensure that the correct incomes are furnished and the explanation of the Assessee is general in nature and therefore his explanation was rejected,he was found to be evading tax of Rs. 11,34,298/- and 50% of tax short to be evaded was levied as a penalty u/s. 270A of the Act amounting to Rs. 5,67,149/-. The penalty order was passed on 05.08.2021.

The Assessee challenged the penalty notices order before the Ld. CIT(A) where the Appeal was stated to be filed late by 38 days. The Assessee submitted a reply and shown a sufficient cause and therefore the Appeal was admitted and delay was condoned. On the merits of the case the written submission filed by the Assessee was considered and thereafter the Ld. CIT(A) held that the Assessee has under reported his income to the tune of Rs. 36,35,570/- and in the result he confirmed the penalty stating that such underreported income is also not covered by any of the exemption exceptions prescribed u/s. 270A(6) of the Act. Thus, the penalty was confirmed

Assessee aggrieved with the order is in appealbefore us. As per the remarks of the Registry, this Appeal is time barred by 04 days, the Assessee has submitted the application for condonation of delay, along with the affidavit, we find that the delay is on account of the reason that Assessee is a sitting member of the

We have carefully considered and find that the delay is for the sufficient cause and therefore we condone the delay and admit the Appeal of the Assessee.

We have heard the rival contentions. The Assessee has challenged by way of first ground that penalty order passed by the Ld. Assessing Officer is not tenable as it did not specify that under which sub section penalty is attracted u/s. 270A of the act and therefore the penalty order itself deserves to be set aside. We find that section 270A(6) is an exception that in specified circumstances will not include the underreported income therefore there is no requirement of invoking any particular limb for the levy of the penaltyu/s. 270A of the Act for underreporting of income. Therefore the ground No. 1 of the appeal is dismissed.

By way of second ground,Assessee has challenged that the underreporting of income has not arose because of any deliberate act on part of the Assessee. On careful consideration of the provision of the act we are not in a position to find any such intention of the Assessee to be imputed at the time of underreporting of income.The Ld. Assessing Officer is correct in initiating the penalty proceedings under underreporting of income. Any willful or deliberate act of concealment would have resulted into the misreporting of the income which is not invoked by the Ld.Assessing Officer and therefore ground no. 2 of the Appeal is also dismissed.

Ground No. 3 of the Appeal is with respect to the fact that subsection 3A of section 71 of the Income Tax Act was newly inserted provision operative from the Assessment Year 2018-19 and the Assessee was not guided properly by his auditor and the said order was purely bonafide. According to the provisions of section 270A(6)(A) if the explanation is bonafide and the Assessee has

In the result, Appeal of the Assessee is allowed.